The San Francisco Chronicle are reporting the city's mayor, Ed Lee, received notification yesterday that San Francisco has been ruled out of hosting the 2017 America's Cup.

Oracle Team USA chief executive Russell Coutts e-mailed the mayor confirming news reports that San Francisco hadn't made the shortlist to host the 35th sailing regatta. San Diego, Chicago and Bermuda are believed to be still in the running.

"Given the tight timeline and demands from prospective teams to confirm the final venue, it has been necessary to continue reducing the shortlist of candidate cities," Coutts wrote. "We have therefore taken the difficult decision to no longer consider San Francisco as a possible candidate to host AC35."

The letter apparently gives no explanation for San Francisco being rejected as a host city, but Lee has been firm that the city not use general fund money to host the event after losing $11.5 million in public money on the event last year.

In addition, the mayor reportedly wanted the race organisers to pay rent on the piers and to pay prevailing union wages for construction projects. Those demands seemed to be a no-go with Coutts and Larry Ellison, the owner of Oracle. As last year's winner, Ellison gets to make the ultimate decision on the host city.

Coutts in his letter said he'd be open to hosting one of the America's Cup World Series event in San Francisco in 2015 or 2016.

Lee said the city would consider hosting a World Series event, which are not as expensive and don't require the same level of preparation.

"We've been very reasonable in our approach," he told the San Francisco Chronicle. "We were hoping that the success of the event (last year) would have them take another look, but I think all we can do is be proud of the fact that we hosted a really great event and that we were willing to do it again in a more rational way."